O.C. unemployment rate falls to 6.8%

Employment numbers

Orange County's unemployment rate dipped to 6.8 percent last month as the local economy continues its slow recovery. It was the first time in four years, local unemployment has dropped below 7 percent.

The county had the lowest joblessness rate in Southern California and was far below the statewide rate, which remained at 9.8 percent. And it was better than the nation's: U.S. unemployment was unchanged in December, at 7.8 percent.

The local news was greeted with enthusiasm at a meeting of the Orange County Business Council on Friday. When economist Wallace Walrod announced the dip, 40 corporate executives and staff members broke into applause. "Orange County continues to be the jobs trendsetter," said Lucy Dunn, the council's CEO. "It's so cool."

The report, however, was mixed. Over the past year, the county's payroll employment growth – company jobs with regular paychecks – has been modest: 13,700 positions, a rise of 1 percent. In December, even while the overall unemployment picture seemed to improve, payroll positions actually dropped by 3,300, reflecting a statewide slowdown.

"The sorts of jobs that were added were self-employment and seasonal jobs," said Esmael Adibi, director of Chapman University's Center for Economic Research. "Someone opens a kiosk in a mall for Christmas. Those are not the stable jobs we like to see."

The year-end drop in payroll jobs confirmed what many economists had been predicting: that uncertainty over the looming fiscal cliff in Washington, with drastic tax increases and spending cuts scheduled for Jan 1, would make businesses hold off on expansion. Although Congress passed a new tax package earlier this month, companies may remain hesitant to hire until decisions on spending are resolved.

The fiscal cliff had a "chilling effect on the economy ... in the waning months of 2012," said Economist Robert Kleinhenz at the Los Angeles County Economic Development Corp. "Businesses and households were not sure how the tax code was going to change and what kinds of (spending cuts) were going to occur."

Congress and the Obama administration have been negotiating how much to cut government spending in an effort to shrink the nation's budget deficit, and have yet to agree. The conflict is expected to come to a head over the next few months.

The uncertainty was reflected in Orange County. In mid-2012, county jobs were growing twice as fast as they were by year's end. "That is worrisome," Adibi said. "It means firms are slowing down hiring."

Over the full year, financial activities led local job growth, with the addition of 7,500 positions, many tied to a revival in real estate sales and rentals. A jump in home-building also led to a boost of 3,200 construction workers.

Leisure and hospitality, for the most part lower-paying positions in amusement parks and hotels, gained 6,600 jobs in the county.

Government posted the largest year-over year decline with the loss of 7,100 jobs, almost all of them in local agencies, as the state cut funding to counties and cities. The county also lost 1,400 manufacturing jobs, following national trends of replacing laborers with machines and moving factories overseas.

In 2012, California jobs grew 1.6 percent overall, but the state also had a year-end drop in payroll positions – 17,700 between December 2011 and last month. "It was the largest decline of any state in the country," said Mark Vitner, senior economist for Wells Fargo Securities. "That is disappointing. But monthly numbers are volatile. The recovery in California remains very much in place."

The number of jobs in California is growing twice as fast as in the nation as a whole, and the unemployment rate fell twice as fast as that of the nation as a whole over the past year, he added.

Kleinhenz noted that the unemployment figures do not reflect people who have given up seeking work. "It can almost double the unemployment rate when you take into consideration those who are not fully employed or who are not looking at all," he said.

The disparity between Orange County and Los Angeles County, where unemployment was at 10.2 percent last month, can be partly explained by education. "In L.A. County only 75 percent of workers have at least a high school degree," Kleinhenz said. "In Orange County, it is more than 86 percent. People with less education have fared worse than those with college degrees."

The monthly jobs report is based on two surveys, one by the U.S. Bureau of Labor Statistics and the other by the state Employment Development Department. The federal government asks 5,500 California households whether anyone in the home is unemployed. The state examines a broader set of data: the number of wage and salary jobs reported by 42,000 businesses.

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